- The share of purchase orders increased from 34 to 54%.
- Today 71% of traders are short the Buck
- The weekly R1 and the 20-day SMA around 118.30 are the nearest resistance
- Immediate support is around 117.45, represented by the monthly S2 and the weekly PP
- 56% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US Markit Manufacturing PMI, US Existing Home Sales, US CB Leading Index, Japanese Trade Balance
The US Dollar's performance was almost identical to the Sterling's, as the currency appreciated against most major peers, but sustained rather heavy losses against the commodity currencies. The USD/JPY edged 0.65% higher, while the USD/CHF added only 0.32%. Meanwhile, the US Dollar managed to advance 0.15% against the Euro, while suffering a 0.21% loss versus the British Pound. Much sharper declines of 1.64%, 1.52% and 1.31% were registered against the Loonie, the Kiwi and the Aussie, respectively.
Initial claims for unemployment benefits in the US surged to the highest level in six weeks for the five-day period ended January 16, judging by the Labour Department's data released Thursday. Such a move was somewhat unexpected for the markets that expected a decline from 283,000 to 279,000. However, the real weekly number came out at 293,000. This statistics coincides with the time frame when US officials are starting to survey businesses and households about employment conditions in January. Recent setbacks in terms of oil prices and strong US Dollar are putting more pressure on energy and manufacturing sectors' headcounts. Despite that, only a sustained increase in unemployment claims will be able to signal some weakness in the US labour market.
In the meantime, one of the closely watched manufacturing surveys in the US showed conditions are moving towards improvement in the Philadelphia Fed district. Survey of industrial sector produced a reading of –3 points for January, up from –5.9 points in the preceding month. At the same time, positive outlook will be affirmed only after the indicator comes back above zero. For now producers are hit by weaker global demand for US-producer goods, as new orders are falling sharply. As for the oil price rout, the Third Federal District, which includes Philadelphia, is less impacted by price declines due to smaller dependence on energy sector.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving the USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US Markit Manufacturing PMI and the Existing Home Sales
From the US Side there are two events worth paying attention to, namely the Markit Manufacturing PMI and the Existing Home Sales. The Manufacturing Purchasing Managers Index (PMI) is released by the Markit Economics and captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States. The Existing Home Sales, released by the National Association of Realtors, provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. Mixed results are anticipated among the US data and could cause a small sell-off if both data releases disappoint today.USD/JPY rises on QQE speculation
The US Dollar unexpectedly outperformed the Japanese Yen on Thursday, amid rumours of the BoJ applying more monetary stimulus. The USD/JPY was able to erase this week's losses, with the bullish trend prevailing earlier today as well. As a result, the Greenback could also negate previous week's losses if it managed to pierce the weekly R1 level just above 118.00. The pair has the potential to rise to 118.46, where the 20-day SMA rests; however technical studies suggest a sell-off is possible, with the immediate support cluster doubtfully limiting the dips.Daily chart
Since Wednesday the USD/JPY has been actively appreciating, even piercing the 200-hour SMA on Thursday. The pair continues to test a now-arisen channel's upper border, which risks being breached, amid JPY weakness today. However, a perfect outcome would be decline, with the retest of the channel's support line around 117.50.
Hourly chart
Bears dominate the market
Other market participants, such as OANDA and SAXO Group, have a completely different sentiment, as the majority of their traders still hold long positions. Among SAXO Bank, 60% of traders remain long the US Dollar, whereas 60% of all positions at OANDA are also long (previously 63%).
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The largest half of the survey participants (56%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 31% of the voters; however, according to the votes collected between Dec 22 and Jan 22, the mean forecast for Apr 22 is 118.88. At the same time, 14% of the surveyed believe the Greenback could fall in the 120.00-121.50 price interval after a three month period.
Traders still believe the pair will continue its depreciation, since only 48% of Dukascopy Community members are bullish.
A trader on the bullish side, namely raposo2, suggested that if situation on the global stock markets got better at the beginning of the week, then there would be a big chance the given pair would stay in long-term consolidation between 116.00 and 123.70. "In short term I see some opportunities for little upward movement to 118.40," he added.
On the bearish side, babanu commented that "everybody expected this pair to soar to the sky after the reference increase by the Fed, but strong Yen and sluggish figures from the US sent this pair to the South," supporting his view.